What happened
Shares of Apple (NASDAQ:AAPL) stock dipped 1.5% in noonday trading, EDT, Monday, and the slip appears tied to some news out of Europe that broke late last week.
So what
As The Verge reported Thursday, the European Commission, the executive arm of the European Union, is considering mandating that all cellphones sold in the EU use a standard USB-C power cord.
Such a requirement, if it becomes law (and it might not become law) wouldn’t be a big deal to companies such as Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) that sell phones that already use USB-C for charging. It could be a big problem for Apple, however, which uses, and sells, proprietary Lightning cables to charge its iPhones.
As The Verge points out, “if you want to plug anything into an iPhone, be it charger or adapter or accessory, you have to go through Apple. And Apple takes a cut of every one of those devices.” While Apple doesn’t break down precisely how much it makes from selling such peripherals for its devices, if you’ve ever tried to shop for a Lightning cord on Amazon and had to balance price against the risk the cord will stop functioning prematurely — just like your last one — it’s hard to escape the impression that Lightning cords provide a nice revenue stream to Apple.
Image source: Getty Images.
Now what
So this new EU law could be a problem for Apple. It might not be as big a problem as it seems, however.
Apple could, for example, design future iPhones to charge wirelessly, as it’s rumored to be planning. The Verge notes that “a USB-C port [would only be] mandatory for devices that charge using a cable.”
It also wouldn’t be a problem for Apple immediately, because manufacturers “will eventually have 24 months to comply with the new rules” if they become law, says The Verge. Given two full years to design a workaround, Apple will probably survive this kerfuffle just fine.
Indeed, I wouldn’t put it past Apple to turn lemons into lemonade and grow an entirely new business selling wireless chargers instead.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
